European platform deals favoured by overseas capital for rapid entry

There will be a flurry of platform deals in Europe in 2018 as a quick way into the market favoured by foreign investors, panellists agreed at the Property EU Outlook 2018: Europe & UK Investment Briefing, which was held on Thursday at TaylorWessing’s London headquarters.

'Corporate transactions will be a feature of the market in 2018, showing a clear acceleration compared to 2017,' said William Matthews, partner, global capital markets research, Knight Frank. 'It is a good way of getting a lot of money into a market quickly. It is hard and time-consuming to assemble a portfolio on an individual asset basis.'

The pressure to invest across Europe and the UK will remain significant, with masses of capital hunting for yield and positive fundamentals supporting the real estate market.

'I believe buying platforms is a trend that will continue across the sectors,' said Mark Rajbenbach, partner, Taylor Wessing. 'It is a much easier strategy than buying assets individually, or wasting time and energy building up your own platform.'

The key driver will remain the desire to get capital effectively into new markets, but 'there is a growing realisation among investors that it is not that easy to deploy capital in another country or continent, so investing in a platform is a good strategy,' said James Raynor, chief executive, Grosvenor Europe.

Transactions volumes will be around the $200 bn mark in Europe this year, according to Knight Frank, not as strong as 2016 due mainly to lack of stock. 'Sentiment is much higher than activity, because it is lack of supply, not lack of demand that is hindering the market,' said Matthews. 'Europe is very interesting.'

A recent survey showed that 90% of investors expect demand for European property to stay the same or increase in 2018, up from 70% last year.
'Investors are generally under-allocated to Europe,' said Simon Martin, head of research and strategy, Tristan Capital Partners. 'A lot of people edged away over the past five years and are now seeking to come back, but it is difficult for them to find somewhere to park their money.'

Despite concerns over interest rate rises, the fundamentals have improved since last year, said Jos Short, executive chairman, Internos Global Investors: 'The political outlook and the economic story are better than they were twelve months ago, so things seem really rather ok.'

Private wealth, including family offices, is playing an increasingly big role in the market and is moving from traditional residential investments into commercial real estate. On a global level, 27% of transactions were private this year, compared to 20% last year. One-third of ultra high net worth individuals are expecting to invest in real estate abroad in the next year, according to Knight Frank.

The competition with institutional players will become more intense. 'Sovereign wealth funds have a rapacious appetite for core assets and they cannot feed that appetite fast enough,' said Martin. 'We recognise we are in a cycle and we keep watching out for red flags, but with those structural players backing up the market, it is difficult to see a falling off.'


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